NEW DELHI (Reuters) - India's mines ministry is seeking a cut in the iron ore export duty after a sharp fall in overseas shipments, days after the prime minister spoke about increasing exports to tame the country's current account deficit.

India was once the third-largest exporter of the steelmaking raw material, but shipments plunged more than 80 percent in three years to hit 18 million tonnes last fiscal year. The lower exports have helped cushion global iron ore prices.

"I have written to the finance and commerce ministries to consider a cut in the duty, at least on low-grade fines," mines minister Dinsha Patel said on Wednesday on the sidelines of a conference, declining to give the duty he had suggested.

Lower production due to a clamp down in illegal mining, an export tax of 30 percent and higher railway freight rates are the main reasons for the slump, according to H.C. Daga, president of the Federation of Indian Mineral Industries (FIMI).

"With the withdrawal of about 100 million tonnes (of Indian iron ore) from the world market, iron ore prices that were in a declining trend suddenly firmed up, benefiting (foreign) private companies at the cost of India and its exporters," Daga said.

Prime Minister Manmohan Singh said earlier this month that the government was trying to remove "constraints in the export of iron and other ores".

Government officials declined to say what steps the prime minister was referring to, but Daga said he expected a cut in the export duty soon as a result of hectic lobbying by FIMI with government departments.

GOA MINES

Patel said his ministry would make all possible efforts to resolve problems related to the iron ore industry in Goa, India's top iron ore exporting state, where mining has been banned since last year following allegations of irregularities.

"I am convinced that the problem of Goa will be resolved soon," Patel said.

Goa expects court approval to resume by year-end the production and export of iron ore from mines with a capacity of about 40 million tonnes as it has taken steps to rectify problems that led to the ban, a state bureaucrat told Reuters in May.

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